LaborFest 2009 Special

North American Free Trade Zones (FTZs):
Undermining US and Canadian Transportation Workers

Richard D. Vogel
Copyright © 2009 by Richard D. Vogel


Permission to copy granted

Author's note: This article is a resource document for "Ten Years after the WTO, The North American Free Trade Zones", a commemoration of the "Battle in Seattle" to shut down the World Trade Organization conference ten years ago. A showing of the video "Labor Battles the WTO" will be followed by a panel discussion on continuing globalization. This event is scheduled for LaborFest 2009 on July 19 (Sunday) 10:00 - 1:00 PM (free) ILWU Local 6 Hall - 255 9th St., SF


Defining the Issue

Free Trade Labor (FTL) refers to labor that is subject to the arbitrary rule of capitalism. The offshoring of jobs and onshoring of temporary workers through managed labor mobility (e.g. guest worker) programs are the dominant strategies for providing corporate access to FTL in the modern world. Free trade labor, in the final analysis, is a zero-sum game for working people.

Free Trade Zones (FTZs) are legally defined areas provided and underwritten by governments to facilitate the exploitation of FTL within their jurisdictions. Free trade zones in North America are undermining US and Canadian transportation workers across the continent.

A brief overview of FTZs puts the current developments in North America in context.


States within States

In 1999 there were over 3,000 FTZs located in 116 countries around the world. Combined, they employed over 43 million workers. Although FTZs undermine all working people, the new zones envisioned for North America specifically target transportation workers.

FTZs, usually located on major trade routes, grant multinational corporations access to cheap labor markets and offer exemptions from taxes, tariffs, and government regulations. Historically, governments dominated by corporate interests demand FTZs while governments that need to create jobs provide them. Hosting governments routinely fund infrastructure development and supply utilities, management, and security services. In many cases they agree to pay penalties if client corporations fail to produce a profit because of labor unrest.

The initial FTZs were strictly offshore operations. The first free trade zones were established in Latin America during the early 20th century and spread throughout the developing world during the 1960s and 1970s. The FTZs evolving in North America are blurring the distinction between onshore and offshore operations by being located adjacent to, or actually straddling, international borders.

The primary function of FTZs in North America is markedly different from those operating in the developing world. The growing dependency of the North American economy on the importation of cheap manufactured goods from the Far East is shifting the focus of FTZs to logistic operations. The fact that the value added to imports from the Far East by transportation often exceeds the value added by manufacturing means that transnational corporations seek to reduce transportation labor costs in order to maximize profits. The main function of FTZs in North America is to provide legally sanctioned sites for intense labor exploitation.

Understanding how FTZs are undermining US and Canadian transportation workers in North America is vital to the struggle against the increasing inequality and mounting environmental damage resulting from neoliberal globalization.


Above the Law

The autonomy granted to FTZ authorities by national governments presents substantial threats to working people and the environment wherever the zones are established.

The primary threat is that legal exemptions granted to transnational corporations in FTZs allows them to dictate wages and working conditions within the zones, placing client corporations above the law. Although usually not granted outright immunity to national laws, businesses can evade the labor regulations of the host country through legally sanctioned but essentially arbitrary administrative procedures. A common practice to guarantee corporate hegemony is by officially recognizing company unions and hindering independent trade unions within FTZs. In most FTZs, the isolated locations and state-of-the-art security systems effectively stifle independent union organizing.

FTZs that also grant exemptions to national environmental protection laws are common in the developing world, allowing transnational corporations to relocate their dirtiest operations instead of cleaning them up. FTZs everywhere are exacerbating environmental damage by concentrating transportation pollution around free trade zones and corridors.

The detrimental social impact of FTZs is the direct result of tax and tariff exemptions along with various financial incentives offered to attract businesses. These exemptions reduce government revenue and starve the social infrastructure of the host country. Funds that could be dedicated to health, education, and welfare programs are retained by the transnational corporations, compounding local, national, and global inequality.

These economic, environmental, and social threats are looming over North America as FTZs are developing across the continent. Although the Border Industrial Program established a rudimentary FTZ in northern Mexico and all of North America was declared a free trade zone under NAFTA, the legally dedicated and government sponsored FTZs located on major trade routes will have the greatest impact on working people and the environment and therefore deserve special attention.

Map 1 shows the major existing and proposed trade routes and FTZs in North America.

Map 1: North American Free Trade Zones

Established Routes and FTZs in North America

The established trade routes and FTZs in Mexico show the lengths to which transnational capitalism will go in order to provide cheap commodities to the markets of North America.

San Luis Potosí

Mexico's first two FTZs (Parque Logistico and Logistik FTZ), both located near the city of San Luis Potosí, constitute the southern terminus of the mid-continental NAFTA corridor that runs all the way to Duluth, Minnesota via I-35 with connections to Winnipeg on I-29 and to Chicago and Detroit/Windsor by way of I-94. Both FTZ's provide multimodal transportation facilities and assembly sites for products and components imported through Mexican maritime ports and re-exported to US and Canadian markets.

In the past, foreign businesses operating in Mexico had to pay a value-added tax on re-exports, but under the country's new foreign trade zone law all merchandise bound for foreign markets is exported totally tax-free, exempting client corporations from any liability for the social costs of production in Mexico.

Parque Logistico, which has 240 acres developed and holds 1200 acres in reserve, is building more than 500,000 square feet of warehousing and is ready to accommodate any kind of business. The multimodal terminal under construction at Logistik FTZ is being built in four stages. The first stage will allow the handling of approximately 50,000 shipping containers per year. In its final stage the terminal will process more than 200,000 containers annually. The products assembled and repacked at Logistik FTZ alone will ultimately fill 500,000 truck a year that will head North on MX 57 and eventually cross the border at Laredo and other Texas points of entry.

Parque Logistico and Logistik FTZ demonstrate the essential threat of all FTZs. The work in these zones is done by poor Mexican or immigrant Central American workers at wages dictated by the companies and endorsed by the state through charro unions. An examination of aerial photographs of Parque Logistico, a typical FTZ layout, reveals how difficult it would be for independent union organizers to even approach workers on-site.

The volume of traffic through the Mexican FTZs is growing exponentially. According to the US Bureau of Transportation, over 3 million trucks crossed the border from Mexico into Texas in 2008 and that number could double in the next 10 years. If the US honors the commitment that it made under the terms of NAFTA to open-border trucking, Mexican, Central American, and Caribbean truckers working for transnational corporations will haul the vast majority of future loads, including backhauls from the US and Canada. Truckers in the North will have to work at wage levels set in Mexico.

Although the expanding FTZs in Central Mexico have already undermined US and Canadian transportation labor significantly, the FTZs envisioned for Punta Colonet on the west coast of Baja California, the Asia-Pacific Gateway and Corridor Initiative in lower British Columbia, and Atlantica: the International Northeast Economic Region represent far bigger threats to working people across the continent. These proposed routes and FTZs are central to the neoliberal strategy to bypass organized transportation labor in the established ports of the US and Canada.


End-Runs around Organized Labor on the West Coast

I: Punta Colonet

The proposed FTZ at Punta Colonet will be centered around a new deep-water port to be built on the Pacific coast of Mexico 130 miles south of the US-Mexico border. Punta Colonet is being designed to handle 1 to 2 million containers when it becomes operational and increase to 6-8 million containers by the year 2020, offering serious competition to the ports at Long Beach and LA. Plans for the initial phase of the Punta Colonet FTZ also include I million square feet of warehouse space for assembly and repacking operations. Many of these operations that are currently located in southern California will follow the container traffic to Baja California.

Most of the traffic generated at Punta Colonet and bound for the heartland of the US and Canada will cross the border at Mexicali, Nogales, or El Paso, severely stressing the fragile environment of the northern Sonoran Desert. Failure of the Punta Colonet FTZ to adopt adequate environmental protection provisions could produce coastal transportation pollution that will rival that of the western Pacific Rim.

Upon completion, Punta Colonet will employ over 100,000 transportation workers and dwarf the FTZs already operating in central Mexico. As in the FTZs at San Luis Potosí, transnational corporations will dictate wages and working conditions in the zone and more deeply undermine transportation workers in the North. If the cross-border trucking provisions of NAFTA are finally implemented, tens of thousands of trucking jobs in the US and Canada will be offshored to Punta Colonet.

The deplorable wages and working conditions that Mexican and Central American workers can expect at Punta Colonet already prevail in Tijuana today.

Though the FTZs in Mexico present the biggest threat to west coast labor, the Asia-Pacific Gateway and Corridor Initiative, a FTZ being developed in Canada, will divert even more west coast shipping traffic if neoliberal plans for the zone are realized.


II. The Asia-Pacific Gateway and Corridor Initiative (APGCI)

Originating at Vancouver and Prince Rupert on Canada's west coast and extending to the Great Lakes region, the Asia-Pacific Gateway and Corridor Initiative is being developed to divert container traffic from established west coast ports in order to deliver imports from the Far East to the heartlands of Canada and the US as cheaply as possible.  The total estimated outlay for APGCI projects, including expanded port facilities, advanced traffic control technology and comprehensive transportation infrastructure improvements, is nearly $1 billion.

Despite the huge capital investment, the success of APGCI as a free trade zone and corridor depends almost entirely on the implementation of a guest worker (FTL) program to provide an abundant supply of cheap immigrant transportation labor. The Canadian Trucking Human Resources Council has estimated a demand for 37,000 new truck drivers a year during the initial years of operation to make the initiative work. The number of freight handlers and repack and assembly workers that will be needed will be double that. English speaking workers from southern Asia are being targeted as the primary FTL pool for APGCI transportation labor.

A viable FTL program is also the key requirement for undermining organized labor on the east coast.


Breaching the East Coast Labor Front

Atlantica: the International Northeast Economic Region (AINER)

Atlantica is a plan to bypass organized labor on the east coast by establishing a FTZ and corridor that will run between the established ports in Canada and the US. Atlantica would be a unique FTZ in that it would cross the international border and span three Canadian provinces and four US states.

The Atlantica corridor will extend from the port at Halifax, Nova Scotia to Buffalo, NY to transport freight that arrives from the Far East via the Suez Express to the Great Lakes region. If Atlantica is established, much of the current NAFTA-EU shipping could eventually be diverted through this FTZ.

Promoted by neoliberals as a matter of economic survival and a master plan to bring prosperity to an isolated region of North America, Atlantica is in fact nothing more than a hyped-up proposal for another FTZ that will benefit big capital at the expense of working people, their communities, and the environment. The Atlantica rail lines and toll road corridor would destroy much of the remaining ancient forest of the northeast and literally divide the province of New Brunswick and the states of Maine and New York. Areas of Vermont and New Hampshire would be isolated and poor rural communities along the route that cannot afford expensive cross-over bridges will be permanently divided and find their ties the rest of New England severed. The results of environmental impact studies of the Atlantica project, if they have been conducted, have not been made public.

Under ANIER authority, local, state, and even national governance would be subordinated to the rule of transnational corporations. The purpose of Atlantica is essentially the same as that of the existing FTZs at San Luis Potosí and those planned for the Pacific coast--the establishment of a state within a state designed and operated to enhance the accumulation of capital at the cost of local working communities and the environment.

Like the APGCI, the success of Atlantica depends on the adoption of a guest worker program to onshore cheap transportation labor from the hemispheric South. In the case of Atlantica, the nations of the Caribbean would be the primary source of FTL. US and Canadian citizens who do get jobs in Atlantica will have to work for discounted wages.

The expansion of FTZs offers no long-term solution to the current economic crisis and raises the possibility of permanent un- and underemployment among transportation workers in North America.

Free trade zones, those in operation, and those on the drawing board, in conjunction with managed labor mobility (FTL) programs, present a clear and present danger not only to transportation workers but to all working people in North America and their communities.


A Jobless Economy?

The "jobless" recovery of 2001 is instructive in the present crisis. That economic revival was based on a renewed assault on labor that pushed many workers in North America into the informal economy and forced them to compete, both offshore and onshore, with cheap labor from the South. The 2001 recovery was only jobless in the sense that traditional jobs in the US and Canada were replaced by cheaper labor arrangements that gave capital the upper-hand. The present, and much deeper, crisis of capitalism promises to go far beyond what was done in 2001.

The recovery of capitalism in North America this time around requires the further development of FTZs as zones of intensive exploitation linked to FTL programs to supply the cheapest possible labor to businesses throughout the economy. The prospect of a jobless economy in North America--a labor market where workers have no effective control over wages or working conditions and, indeed, no guarantee of work at all--is a real possibility.

The question of the future of FTZs and FTL programs must be placed on all local, national, and global political agendas. To default on this issue is to default on the future of working people and the environment.

Ultimately we will have to face the facts that free trade labor is a zero-sum game for working people, and free trade zones are dead zones for all labor. It is clearly time to consider the socialist alternative that offers environmental sustainability and social security for us and future generations.


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